The IT mindset in logistics

By Biju Kewalram|Sunday, June 08, 2014

Executive IT Corner

with Biju Kewalram

Many words have been written about how information accompanying the freight is as important as the physical movement of cargo, and it’s true.
IT has progressed from a finance support discipline, reporting to the chief financial officer, to a broader, strategic function. The evolution of the chief information officer to a C-level position reflects that, as does the growth of the CIO and other senior IT management into a business mind-set. While business has come to recognize the role of IT with CFOs, chief marketing officers, and other functional executives learning a new vocabulary to better integrate with technology, so too organizations have compelled members of IT departments to “come out of their shell” and engage deeper with organizational challenges to combat competition and respond better to market conditions.
Logistics markets today are in constant flux: there’s mode change between air and sea, tighter margins, rate challenges arising from capacity, changing distribution channels, constant realigning of global trade patterns as production and manufacturing moves from country to country, labor arbitrage opportunities vanishing in one country and emerging in another. This calls for logistics and supply chain driven organizations to find new business models and newer ways of orienting themselves to the marketplace challenges.
I have noticed an interesting trend as logistics businesses build their responses to market conditions. The more progressive organizations are reaching “across departments” and in some cases adopting the tools and techniques that have traditionally been associated with the IT function. These tools and methods incorporate IT techniques and processes that have become mainstream and melded into the way organizations think, find and implement solutions. Heard the term “gap analysis” lately? That term has long been used in IT departments to identify what needs to be developed in a new system — and as IT folks are invited more and more to meaningful strategic meetings, the entire organization adopts some aspects of the IT mindset.
Here are two areas where organizations can, or should, dock into the IT mindset and where IT thinking can support these emerging methods.
There are a number of process improvement toolboxes and methods available today. Since the world of process improvement is about eliminating wasteful processes, these initiatives typically start with process examination. The emphasis is on group and collaborative examination of start-to-finish processes within an organization and the design of new processes that eliminate waste.
While the methods used to implement revised processes are outside the scope of this discussion and different to IT, there is a large element of analysis, design and redevelopment of processes that closely resembles software and systems development methodology, and which should mandate participation of IT staff in these organizational redesign initiatives as part of a multi-discipline team.
Additionally, process redesign is inevitably going to result in supporting IT system change, so it is highly advisable to include IT folks early in these projects and as part of on-going management of the initiatives.
Incorporating the IT mindset into process improvement initiatives should therefore consist, as a minimum, of the following steps:

Formation of a multi-discipline team.

Detailed walk through of current processes (“as-is scenarios”).

Identification of waste-producing steps in the current processes (“is this step completely essential or can it be eliminated”).

Design of revised processes (“to-be scenarios”).

Creation of an IT redesign project to support the new process, produce ongoing numerical performance indicators and application changes using typical software development methods.

Inclusion of IT in continuous process improvement exercises.

There has never been a bigger call for innovation in the logistics and supply chain industry than there is today. Competition is high, the differentiation opportunities in the small and midsized enterprise segment of the industry are not obvious and the pressure to transform is enormous.
Too often, organizations think that being innovative is about conducting effective brainstorming sessions and capturing output that will result in “innovation.” True innovation, however, is hard work and generally involves starting with basic fundamentals before achieving breakthrough changes.
Further, for a logistics organization to be innovative, traditional thinking that is focused on “we move freight” needs to be supplemented with “what else can we do to make the customer’s life easier.” Innovations in logistics and supply chain are there even in the toughest of times. In fact, most of these innovations are not possible without IT innovation first.
While IT in an organization is not typically associated with innovation, a large number of disruptive business models that have emerged from technology startups show that the IT mindset can lend to breakthrough thinking when it’s part of an organizational culture that allows it to function in this manner.
To make effective use of IT in an organization’s innovative efforts, it is necessary to:

Build an organization-wide culture of innovation.

Understand the tools that IT has used to innovate (like Agile Software Development — for example, see http://agilemanifesto.org/).

Incorporate IT professionals into the innovation process from the outset.

In summary, IT departments have demonstrated over the years that they are capable of finding efficiencies and innovative approaches within the IT function. Smart organizations include the IT function in wider aspects of organizational strategic development.
Kewalram has spent decades developing freight forwarding and NVO information technology, and now provides systems consulting and training to logistics services providers. He can be reached by email.